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Expectations for TJX Companies’ Earnings in Fiscal 3Q18

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Strong track record

TJX Companies (TJX) has exceeded analysts’ earnings expectations in nine of the past ten quarters and was in line with estimates in one quarter. In fiscal 2Q18, which ended on July 29, 2017, the company’s adjusted EPS (earnings per share) of $0.85 surpassed analysts’ expectation of $0.84.

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Earnings recap

The company’s EPS rose 1.2% on a year-over-year basis in fiscal 2Q18. The growth was primarily driven by higher sales. However, currency headwinds dragged down its fiscal 2Q18 EPS by $0.04. Higher wages negatively impacted fiscal 2Q18 EPS growth by 2%. Changed accounting rules for share-based compensation had a slightly favorable impact on the company’s bottom line in fiscal 2Q18.

Earnings guidance

The company expects fiscal 3Q18 EPS of $0.98–$1. That estimate reflects an 8%–10% increase compared to adjusted EPS of $0.91 in fiscal 3Q17. Analysts expect the company’s fiscal 3Q18 adjusted EPS to rise 9.9% to $1.

Analysts expect rival Ross Stores (ROST) to report an 8.1% rise in adjusted EPS of $0.67 for fiscal 3Q17, which ended on October 28, 2017.

For fiscal 2018, which will end on February 3, 2018, TJX Companies expects EPS of $3.78–$3.82. That guidance implies a 7%–8% rise from the company’s fiscal 2017 adjusted EPS of $3.53.

Higher wages are expected to have a 2% negative impact on the company’s fiscal 2018 EPS growth. The change in the accounting rule for share-based compensation is expected to enhance fiscal 2018 EPS growth by 2%.

Next, let’s look at TJX Companies’ valuation.

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